In a recent viral LinkedIn post, Arjun Vaidya, co-founder of V3 Ventures and former founder of Dr. Vaidya’s, highlighted a growing trend in the automotive industry: the software-as-a-service (SaaS) approach to car features.
Vaidya shared how he came across a YouTube review of the new Mercedes electric sedan. “Halfway through, the reviewer mentioned something that made the founder in me sit up,” he wrote. Drivers could pay an annual fee of around $1,200 to activate the car’s full acceleration. Without the subscription, the vehicle’s performance would revert to a slower mode.
“This is not just a car subscription; it’s about subscribing to features already inside the car,” he explained.
From Ownership to Access
As highlighted by Vaidya, for years, people have misunderstood what “SaaS for Auto” means. It’s not about subscribing to a car instead of buying one; it’s about subscribing to the features already built inside your car.
The hardware, the battery, the chip, and the motor are already there. But the company controls which features are accessible, and for how long.
Vaidya notes that this shift is already happening across the world:
- BMW experimented with monthly subscriptions for heated seats and adaptive cruise control.
- Tesla pioneered software-based upgrades, charging monthly for its “Full Self-Driving” capability.
- Audi lets users upgrade headlights or driving modes through paid software updates.
- General Motors (GM) expects to make $25 billion annually from software services by 2030, more than the total annual revenue of Mahindra & Mahindra.
For automakers, this represents a great strategic advantage.
The Business Model Behind SaaS Cars
The shift to a subscription-based model in autos mirrors what happened in software two decades ago. Microsoft went from selling boxed CDs of Office to recurring Office 365 subscriptions, and multiplied its lifetime revenue per customer.
Car companies are following a similar path.
1. Zero Marginal Cost
The hardware is already installed. Activating a feature through software costs almost nothing.
2. Recurring Revenue
Instead of earning once per sale, manufacturers can now generate steady, high-margin income over time.
3. Lower Upfront Cost
Subscription-based features let brands sell cheaper base models, then earn from incremental upgrades.
In short, they’ve found a way to make cars behave like apps.
Software Becoming the Most Valuable Part of a Car
The shift marks a broader trend where software, rather than the engine, is becoming the car’s most valuable asset. Vaidya posed a question to his readers: “Would you pay more for a feature? Or is a car a car once you buy it?”
He also noted that while such models have been embraced in the West, Indian users may find them frustrating. “This is new behaviour from the West that has been exported here. I think it’ll annoy Indian users. You? Debate me,” he wrote.
As automakers increasingly explore software monetisation, the concept of paying for car features rather than the vehicle itself could reshape both consumer expectations and the automotive business model in India.
Final Thoughts
The move to subscription-based features shows that software is becoming as important as the engine in cars. For manufacturers, it creates new ways to earn a steady income. For buyers, it changes the way we think about ownership, paying for features instead of the whole car. In India, this approach may take time to catch on, but as more vehicles become software-driven, paying for upgrades and new capabilities could become a normal part of owning a car.
Leave a Reply